HospitalityInside - German International Hotel Association (IHA): Calls for help from every corner – Corona rescue package not helping fast enough or not precisely – Urgent appeal to government

  Copyright HospitalityInside 2020. Article for personal use only. Berlin (March 27, 2020). The hotel and catering industry in Germany has been floored. Two days ago, the government pushed through its EUR 156 billion corona aid package, but despite this, the German Hotel and Restaurant Association (DEHOGA Bundesverband) and the German International Hotel Association (IHA) this week made an urgent appeal for further support, better tailored to the specific needs of the industry, in a letter to the Chancellor. Quite exceptionally, politicians want to act very quickly, yet in practice there are many impediments, e.g. from house banks. By 14 April, everything is to be worked through. "But that's too late," Markus Luthe, Chief Executive of the IHA, and IHA Chairman Otto Lindner want politicians to know. An interview on the current state of affairs and on the tension in the industry. What were some of the worst moments for you personally over the past four weeks? And can you see anything positive today? Luthe: The worst moment for me was when my team told me about the first member who cried on the phone. I have not had to experience this in 25 years of life with the IHA. Lindner: For me, the worst moment was this week when my house bank suddenly imposed further conditions on a line of credit in the millions that for months had previously been guaranteed to me by handshake. It was coupled with the statement that it is ultimately a "standard loan" that would have to be carefully examined, of course now against the backdrop of the corona crisis. And that payout would be made before mid-April!! Positive is certainly the great approval and praise that we are currently receiving from our members for our work via all communication channels. In times of need, members obviously stand together particularly closely and this gives us as the IHA team a lot of strength and energy, whether we are working full-time or in a voluntary capacity. The hotel industry has been floored, nationally and internationally. STR and Fairmas demonstrate this with their data, which is constantly updated. Which and how many hotels are still open in Germany? Luthe: The shutdown is meanwhile almost total by now, all graphs are approaching the baseline. Occupancy rates are in single-digits. Just how many hotels remain open at the moment, we do not know exactly. We will launch a survey next week in order to gain an overview of the situation, this week it was the aid measures that had priority. What is the order of magnitude of the rescue funds in Germany and how many applications have been made for short-time work and financial aid? Luthe: The German government has launched an 'economic stabilisation fund' of EUR 600 billion. Of this amount, EUR 400 billion are state guarantees for liabilities of companies with more than 250 employees and EUR 50 million in revenue, EUR 100 billion for any direct state investments and EUR 100 billion for refinancing through the KfW. An additional EUR 50 billion are available for small companies with fewer than 10 employees and for solo self-employed persons, who can receive up to EUR 15,000 in grants. In the classic accommodation sector though (hotels, bed and breakfast, inns and guesthouses) 88.7% of businesses have 10 or more employees. And only 0.6% of the companies generate revenue of more than EUR 10 million. The lion's share of the medium-sized hotel industry in Germany, with its total net revenue of EUR 29 billion and 317,000 employees subject to social security contributions, is thus in danger of falling through this economic safety net. With regard to liquidity aid and short-time working allowances, the development banks and employment agencies are currently being overrun, with thousands upon thousands of applications. Quick solutions must now be found to overcoming the bottlenecks which have been identified here. After an initial survey, the Federal Employment Agency announced on 21 March that 76.700 companies had reported short-time working because of the coronavirus. In comparison to the previous year, the numbers have already more than doubled. How many of the calls for help come from small and medium-sized enterprises (including restaurants, bars, cafés and smaller franchisees), how many such calls come from hotel groups with over 30 hotels? Lindner: Nobody is able to keep up counting this any more. The particular and striking aspect of the corona crisis is that absolutely everyone is affected. The calls for help are evenly distributed, heartbreaking and come from all corners – from the small pub to the large hotel chain. What sort of timescale has been promised to the industry for the processing of requests for assistance? Do the aid payment promised by the Federal Government also reach those that need them in time? What's the hold-up? Luthe: Since the liquidity support is to be handled through the business's house bank and so indirectly, the procedures are highly complex and have lots of special features at the various levels. By 14 April, everything is to be worked through. But that's too late! As a result, we are putting pressure on contact persons and insist on advance payments etc., because companies need liquidity now and not later. To what extent is financial support linked to loan conditions and/or collateral? Lindner: The development bank, KfW, assumes up to 80% of the risk from the house bank of the large hotels (those with over 250 employees) and 90% of the risk for small and medium-sized hotels, provided they were not already in financial difficulties by the cut-off date of 31 December 2019. However, we have also had feedback that humiliating and inappropriate formal declarations on the financial circumstances are being demanded at house banks. This way, the "fast and unbureaucratic help" is certainly not reaching the entrepreneur! This comes across quite differently in the statements made by ministers on the TV talk shows. Due to the speed at which information and regulation are changing, we have stopped preparing information on support for members, and instead, recommend that they go directly to their house bank with the usual documents. For IHA members, specialists at Hotour Hotel Consulting have kindly set up a free hotline for IHA members, providing optimal help in preparing for discussions with banks (see link below/article Hotour). Our current impression is that the banking sector is making every effort to translate the signals of support coming from policymakers into concrete liquidity assistance, but is clearly coming up against limits imposed under supervisory regulation and provisions on state aid, buzzword: Basel I-III. The state must, therefore, provide a 100-per cent guarantee and loosen up financial market regulation to some extent in order to face in the corona crisis. Only this way will the protective shield be effective. Do you see competition between chains and medium-sized individual hotels emerging as regards the grant of financial aid? How can this be prevented? Lindner: No, there must not and will not be any sign of businesses being pitted against each other! As promised, the protective shield must be there for hotels of any and all sizes – and, in factual terms, is also of unlimited capacity. Now the OTAs, through their European association, have also spoken out and are pushing to be included in the rescue packages under the same conditions as the hotel industry? Luthe: It sounds as if so many global players want to push their way under this protective shield, conceived for the sector of industry most affected, that perhaps there’ll be little left for medium-sized enterprises... In all seriousness: I get annoyed when companies, which otherwise use every trick in the book to ensure they pay little or no tax in Germany or Europe, and then appeal to this very community for solidarity. Businesses cannot shoulder the global crisis alone. The entire process chain must be included: Does the association therefore also speak with banks/funds/owners etc. regarding credit information/information on lease reductions? How helpful are these hotel partners? Lindner: These are individual discussions which are not conducted by the association but rather bilaterally between the tenants and landlords involved. Our task as an association is to ensure the framework conditions for financing or tenancy law are as positive as possible and to provide concrete assistance. What is clear is that there must be agreement and everyone will have to do their share. And this preferably without court cases, but rather in a spirit of fairness and partnership. How realistic and quick to implement are conversions from empty hotels into hospitals or "hotel offices"? Lindner: The willingness of the hoteliers to help here is enormous, there are already many discussions and concrete plans. We believe that such provisional conversions can indeed be carried out very quickly and pragmatically (see link below/article Conversions). How will you be able to assess the promise of rapid aid and its delivery so that you can put further pressure on politicians just as quickly if necessary? And by when do you think the economic cycle should be revived again? Luthe: All members have been asked to give us quick and clear feedback as to whether the aid really reaches the companies in a timely and comprehensive manner. Only then will we be able to demand and implement any necessary subsequent adjustment. There are already some industry insiders who predict: Once the restrictions are eased and even something comparable to "normal" life returns, tourism in Germany will go through the roof. Do you share this view? Lindner: One thing's for sure: We must certainly put to one side the idea that we’re dealing with "just a bit of flu" and the "herd immunity nonsense" of Boris Johnson and Donald Trump. At present, no one can seriously predict how long the state of emergency will last on the back of this pandemic and when and how restrictions on movement and assembly will be relaxed again. Personally, I look anxiously to distant countries like India or to the African continent where the wave of infections is only just beginning. Certainly in the western world, as in Germany, there is a considerable need for recreation, travel and meetings. It is to be hoped that it will soon breathe life back into our hotels, but I can only recommend everyone to be rather careful with these predictions! Mr Luthe, you are also Germany's representative on the Executive Committee of HOTREC in Brussels. How does Germany compare with the rest of Europe? Luthe: The governments of all 29 HOTREC member countries have meanwhile put together rescue packages in order to help economies which have come under strain through no fault of their own. Of course, the instruments of support vary considerably depending on the particular finance, tax and social security systems in each country and are therefore difficult to compare across the board. If you look at the size of the rescue packages that have been deployed, the truly huge aid package put together in Germany stands out. Germany is, after all, the largest and economically most powerful country in Europe. But from the perspective of the hotel industry, it is the details that matter, whether the help is practical and whether it reaches the hotels quickly enough. The Austrian system for granting liquidity support, for example, seems to us to be a good example. Here, the Austrian Hotel and Tourism Bank (ÖHT) plays an efficient key role. Copyright HospitalityInside 2020. Article for personal use only.